The Publishing Industry Can Survive, and Even Thrive On, the iPad and
Kindle, According to IT Expert Vasant Dhar from NYU Stern

February 11, 2010 01:11 PM Eastern Standard Time

NEW YORK--(BUSINESS WIRE)--What does Apple’s launch of its new iPad to rival Amazon’s Kindle
e-reader mean for the future of the publishing industry?

NYU Stern Professor Vasant Dhar, an expert in the strategic implications
of information technology, warns that the publishing industry will be
the next “carcass” if it doesn’t embrace a new business model, and he
proposes what this new model should look like.

“Publishing executives have an unprecedented opportunity to grow the
industry. Yet, what they are doing is defending their old business model
– which, frankly, is now antiquated,” said Professor Dhar. “The two are
mutually exclusive.”

Professor Dhar, who conducted the first study to quantify the economic
impact of user-generated content for the music business, cites the music
trade as a perfect example of an industry that failed because it was
unprepared and resistant to adopting new technologies. Instead of
focusing on providing their customers value and reasonable rights of
usage, they became obsessed with preventing piracy, and it cost them
dearly.

He argues that publishers should adopt a more market-back-focused
business model that welcomes technological innovation. “Executives are
disconnected from their rising consumer base. They underestimate the
power of and the cultural shift that has been brought on by emerging
technologies.”

Professor Dhar explains the drivers behind the technological shift:

Moore’s Law – which states that raw computing power doubles every 18
months, making general purpose devices capable of rendering content at
high quality

The increasing level of digitization of virtually all types of content
and the explosion of user-generated content: data on the Internet
doubles every three months, and roughly 20 hours of new content is
currently uploaded every hour on YouTube

The modularity of software, which makes it easy to build new
applications: while software productivity languished for decades, it
has now kicked into high gear as object-oriented software makes it
easy to plug-and-play self-contained modules into high-quality systems
very quickly

Taken together, the three drivers are powerful disruptors of existing
business models. He suggests the publishing industry implement a digital
strategy based on simple pricing and digital rights aimed at growing the
market of readers. “Increasingly, consumers prefer electronic delivery
of their content. Publishers should tap this market and see it for what
it is – growth,” said Professor Dhar. “Would you rather have a piece of
a growing market even if it’s a smaller percentage than before, or try
and hold onto a larger piece of one that is crumbling?” he asks. All the
evidence to date suggests that defending obsolete business models isn’t
a good idea, he says.

Professor Dhar’s point of view is grounded in a paper in which he
provides a framework for understanding how information technologies
transform industries. The paper, “Information Technologies in Business:
A Blueprint for Education and Research,” was published in INFORMS
in 2007 with NYU Stern Professor Arun Sundararajan. The full paper is
available for download at: http://isr.journal.informs.org/cgi/content/abstract/18/2/125.